3 Apparel Stocks That Will Surprise Investors With a Strong 2016

As the new year rolls in and markets fall under a dismal shadow, it's heartening to still find reliable stocks that offer solid income and growth possibilities. Here are three apparel stocks that should deliver healthy returns in 2016, notwithstanding the sector's flat performance in 2015.

Ross Stores deserves your attention largely on account of its track record, sound business model and excellent future prospects. And the company's stock gained even during the last recession.

Analysts project Ross Stores to deliver earnings-per-share (EPS) growth of 12.7% (Jan. 2016 fiscal year) along with a 7.8% upswing in sales. The momentum should keep going, with next year slated to witness double-digit EPS growth as well as sales growth at nearly 7%.

The third quarter for Ross stores was solid, but bear in mind, the numbers weren't a flash in the pan. Value-focused shoppers (or, moderate-to-low income customers) have consistently come back for its collection of brand bargains, driving repeat sales.

At a time when other apparel retailers are struggling with their performance, Ross Stores clearly stands out. Its shares are available at a price-to-earnings growth (PEG) ratio (five-year expected) of 1.91, compared to others like Guess' Inc. (2.56), The Gap Inc. ((2.75 times), The Buckle Inc. (46.55), and DSW Inc. (4.73).

Children's merchandise and apparel is a thriving sub-sector of retail. In fact, Children's Place is slated to outperform its industry. Analysts expect the company to register a 15.08% EPS growth (2016 fiscal year) compared to the industry benchmark of 12.1%. Next year (2017 fiscal year), the company is projected to push earnings by 11.39%, compared to the 8.2% for the industry.

The stock is expected to do better than most of its peers over the next five years, with expectations of over 10.07% EPS upswing every year, double the pace of the S&P 500 for the same period.

As demonstrated in the third quarter, Children's Place has managed to avoid slashing prices, which would have hurt profit margins. Efforts to streamline international and wholesale channels also have been successful.

With activist investorsMacellum Advisors and Barington Capital Group deeply involved in reconfiguring the company's prospects, expect Children's Place (which trades at a PEG ratio of 1.80) to buck a negative market.

Our final pick on this list is Express, a specialty apparel and accessories retailer of women's and men's merchandise (targeting 20-30 year old customers). The stock's 10% drop over the last three months makes it an attractive proposition. Going by its 12-month price targets, Express Inc. could rise from its current levels of $16.5 to $24 -- a solid 45% boost.

While Express may not measure up to the likes of an Amazon, this small-cap stock possesses inherent strengths that most retailers don't.

Its $90 million cash reserves can help it pay off nearly all of its $70 million debt and still remain comfortably placed. We believe the company, which currently operates over 650 retail and factory outlet stores, offers a definite long-term investment opportunity.

With its EPS scheduled to grow by 10% every year for the next five years, Express is available at a PEG ratio of 1.17, (a cost-effective option in the apparel retailer space). With the company's presence in high-traffic shopping malls, lifestyle centers, and street locations across the United States, Canada, and Puerto Rico, Express should deliver market-beating returns.

The new year has gotten off to a terrible start, which begs the question: what is legendary investor Warren Buffett buying and selling these days? For our free report on Buffett's latest investment moves, click here. Buffett is worth $62 billion, so it always makes sense to follow the lead of the Oracle of Omaha. Warren Buffett's buying-and-selling decisions will give you the clues you need to survive what promises to be a very tough year.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.